Unpacking the Effects of Corporate Venture Capital Investor Ties on the Reduction of Price Discounting among IPO Firms

Ari Ginsberg, Iftekhar Hasan () and Christopher L. Tucci
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Ari Ginsberg: New York University
Christopher L. Tucci: Ecole Polytechnique Fédérale de Lausanne

Entrepreneurship Research Journal, 2011, vol. 1, issue 2, pages 6

Abstract:

We examine how ties to different kinds of corporate venture capital (CVC) investors help new ventures overcome the liabilities of market newness they encounter when seeking to undergo an initial public offering (IPO). We analyze a sample of 315 IPO firms with ties to CVC investors and find that the offering price is less discounted when these CVC investors are part of a commercial bank, or in a company that is a member of a major stock exchange. We also find that the effect of an affiliation with a CVC investor in a company that is a member of a major stock exchange is stronger in hot markets than in cold markets, while an affiliation with a CVC investor in a commercial bank is not. Our results suggest that the IPO market recognizes that know-how and prominence based signals conveyed by CVC investor affiliations provide additive reductions of price discounting, and that the certification value that prominence based signals provide also depends on the market conditions in which the IPO takes place.

Keywords: Entrepreneurship theories and conceptualizations; corporate venture capital investor; market-newness liabilities; initial public offerings; underpricing (search for similar items in EconPapers)
Date: 2011
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